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World News See other World News Articles Title: Ten Consequences of Greek Referendum's 'No' Ten Consequences of Greek Referendum's 'No' By Mohamed A. El-Erian | Sunday, 05 Jul 2015 06:10 PM By heeding their government's advice and voting "No" in the referendum on Sunday, Greek citizens sent an unambiguous message. Much like the fictional Americans portrayed in the movie “Network” who threw open their windows and shouted out, “I'm as mad as hell and I'm not going to take this anymore,” the Greeks are demanding that the rest of Europe acknowledge their distress. At this stage, however, only a handful of European leaders seem willing to listen; and even fewer appear willing to deliver the sort of relief that Greece desperately needs. The implications will be felt primarily in Greece, but also in Europe and beyond. Here are 10 consequences of the vote that could unfold in the next few days: 1. The victory of the "No" camp — with more than 60 percent of the vote, according to preliminary returns — will initially lead to a general selloff in global equities, along with price pressures on the bonds issued by Greece, other peripheral euro zone economies and emerging markets. German and U.S. government bonds will benefit from a flight to quality. 2. Having been caught off guard, European politicians will urgently seek to regain the initiative: Chancellor Angela Merkel of Germany and President Francois Hollande of France will meet in Paris on Monday to work on a response. In a perfect world, these leaders would move quickly and effectively with the Greek government to get past the conflict and acrimony that preceded the referendum. This is likely to be difficult, given the mistrust, bad blood and damaging accusations that have poisoned the relationship. 3. Even with those challenges, Greek and European politicians don't have much time to get their act together. The horrid conditions in Greece will get a lot worse before they improve. Without huge emergency assistance from the European Central Bank — a decision that faces long odds — the government will find it hard to get money to the country's automated teller machines, let alone re-open the banks. 4. As hoarding increases, shortages of goods, including fuel and food, will intensify. Capital and payments controls will be tightened. The economy will take another worrisome step down, worsening unemployment and poverty. And the government will struggle to pay pensioners and the salaries of civil servants. 5. As a result, the government will be under mounting pressure to issue some type of IOUs to maintain a sense of a functioning economy. If it does, the IOUs will take on the role of a parallel currency, quoted domestically at a discount to the single currency. 6. Outside Greece, a lot of thought will be given to limiting adverse spillovers. The ECB will most likely have to roll out new measures to contain regional contagion, including expanding the current program of large-scale purchases of securities. This will weaken the euro’s exchange rate. In addition, together with the International Monetary Fund — to which Greece is already in arrears — officials will be preparing for serial Greek defaults. 7. All parties involved will find themselves slipping into their Plan B mode. This transition will probably be much more traumatic for Greece than for the rest of Europe. 8. With the ultimate goal of countering as quickly as possible the likelihood of further human suffering, pain and uncertainty, Europe has the instruments and institutions to limit contagion and maintain the integrity of the euro zone. But this will require ECB action to be coupled with measures by the European Stability Mechanism and the European Investment Bank aimed at completing a banking union and making progress on fiscal integration. 9. It is quite doubtful, however, that Greece will be able to restore its status as a full member of the euro zone. Indeed, without very skillful crisis management, it is at high risk of becoming a failed state. Rather than just stand by, Europe needs to ensure that Greece's exit from the 19-member euro zone doesn’t also result in its dissociation from the larger European Union. This could involve special membership in an association agreement, for example, 10. Finally, expect an explosion of blame. This unproductive activity may end up delaying Europe's urgent need to internalize the lessons from this sad outcome: A series of broken reform promises by several Greek governments was made worse by political stubbornness, poor analysis and inconsistent follow-through by Europe, which is contributing to the loss of Greece as a functioning member of the family. This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors. To contact the author on this story: Mohamed A. El-Erian at melerian@bloomberg.net Read Latest Breaking News from http://Newsmax.com www.newsmax.com/Finance/M.../id/653545/#ixzz3f9CDrr1l Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest Begin Trace Mode for Comment # 7.
#1. To: BTP Holdings (#0)
This is all about long-term gains vs. short-term ones. The reason why they're in this mess to begin with are all of the greedy people feeding off of the IMF and it's contrivances and "free-lunch" programs. Nothing's going to be easy or a quick fix. But if people aren't willing to hunker down and build a real economy, and maybe that's just where we are as a world today, then they deserve global slavery.
That makes a great deal of sense. So you think there's hope for the place?
Honestly, I don't think there's hope for the world. Far too many peoples' understanding is based on false premises promulgated via TV and "easy" and brainless sources, including our public "education"/indoctrination facilities. As long as people choose to make decisions based upon contrived circumstances, premises, and bases, there is no hope, ... barring crash and the unlikelihood that the change is positive coming out the ass-end of it. Among the very first things to change if things are to work out favorably is that the work ethic in this nation and world needs to do an about-face. I don't see that happening. People are just too damned greedy and lazy and worship mammon to the extent that they want it without working for it and have been led to believe that they deserve it simply for "having a degree," needing/wanting a job, and for other reasons that make no f'ing sense whatsoever.
Anybody think there's hope for Greece? Wish they'd just repudiate their IMF figures -- well, everything. Dunno why, but I've long had a vague impression the place was rather liberal overall.
I think that most European countries are liberal. I really don't think that the Greek people realize what it will take to straighten themselves out. I just posted a long analysis based on another related piece here; Right now IMO it's all big talk. To truly fix Greece, or any modern government, one would have to slash the size of government and allow the economy to restore itself naturally without, or at least with minimal government interference. Since most big pensions, a good many high paying jobs, etc. all revolve around the government, coupled with the people foolishly looking to the government for the answers, it's hypocrisy at its finest. The people, in Greece or elsewhere, and imo, do not have the disciplinary wherewithal to actually support what needs to be done in their long-term interests. Work ethic is at historical lows globally imo and so is the peoples' tolerance for inconvenience.
I agree.
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